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TMI Blog2020 (1) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ing off brought forward depreciation/loss of Rs. 1,01,40,76,789/-under the normal provisions of the Income Tax Act, 1961 (for short "the Act") and Rs. Nil under section 115 JB of the Act after setting off lower of the brought forward depreciation/business loss, profits. Assessee revised the return on 1/9/2009 declaring a total income of nil after setting off brought forward depreciation/loss of Rs. 104,75,87,646/-and also nil under section 115JB of the Act. Assessment was complete by order dated 30/12/2011 under section 143(3) of the Act after making several additions which includes, for the purpose of these appeals, Rs. 4,67,23,766/-under section 14A of the Act read with Rule 8D of the Income Tax Rules1962 ("the Rules"), disallowance on account of provision for leave encashment and provision for gratuity while computing the book profits u/s. 115JB of the Act, disallowance on account of furnishing expenses of Tropicana beverage merger, disallowance of excess depreciation on computer peripherals, disallowance of depreciation on non-compete fees under normal computation and the disallowance of depreciation on account of merger with the Tropicana beverage company under normal computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t where the assessee declared tax-exempt income and voluntarily disallowed a certain expenditure under section 14A, in the absence of any reason why the assessee's claim for disallowance under section 14A had to be rejected, learned Assessing Officer was not justified in computing the disallowance. It is further held that by no stretch of imagination can section 14A of the Act read with Rule 8D of the Rules be interpreted so as to mean that the entire tax exempt income is to be disallowed, the window for disallowance is indicated in section 14A and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income", and this proportion are portion of the tax exempt income surely cannot swallow the entire amount. 8. Further in assessee's own case, a coordinate Bench of this Tribunal held that the disallowance in any case cannot exceed the exempt income. Ld. DR does not dispute this proportion of law as laid down by the Hon'ble High Court and in a number of decisions by the coordinate benches of this Tribunal. We, therefore, while respectfully following the same answer the issue in favour of the assessee and allow ground No. 1, 2 and 4 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions and is largely based on estimates and presumed figures, the basis of calculation might be scientific but this does not make it an actual/ascertained liability. According to the learned Assessing Officer even if an amount is at all required to be set-aside for meeting liabilities in future, the same can be done by creating a reserve rather than creating a provision which is directly charged to the taxable profit. Learned Assessing Officer, therefore, brought these amounts to tax. 14. At the outset, Ld. AR submitted that the Assessing Officer had accepted that the basis of calculation was scientific, but it was still held that the same is not an actual/ascertained liability. He submitted that a similar issue had arisen in assessee's own case for the assessment year 2002-03 in ITA No. 834/del/2010 and 2003-04 in ITA No. 936 /Del/ 2012; that the matter was restored back to the learned Assessing Officer to verify actuarial valuation, and the learned Assessing Officer after verifying the actuarial valuation report allowed the claim of the assessee. He further submitted that similar was the case in respect of the assessment year 2005-06 in ITA No. 822/del/2004 when the coordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of unfurnished expenses of Tropicana Beverage Manager. It could be seen from the impugned assessment order that during the year M/s Tropicana Beverages Company (TBC) has merged with/amalgamated with the assessee company w.e.f. 1/4/2007 and while filing the original return of income a sum of Rs. 15,37,72,000/-was claimed towards expenses relating to TBC and added back, whereas in the revised income the same was not so added back. Assessing officer was of the opinion that such an expenditure pertains to/incurred for the purpose of amalgamation/merger of the two entities, and therefore, the same has to be capitalised and only 1/5 thereof has to be allowed as per the provisions of section 35DD of the Act. On this premise learned Assessing Officer added back the 4/5ths of Rs. 15,37,72,000/-which comes to Rs. 12,30,17,600/-to the income of the assessee. 18. According to the assessee these expenses related to the operation of M/s Tropicana Beverages Company and after the merger, the assessee claimed the same as a deduction under section 37 of the Act. Assessee submits that this expenditure was not, as held by the learned Assessing Officer, incurred for the purpose of amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation was claimed it 60% though they form part of their office equipment/furniture and fittings. Learned Assessing Officer therefore disallowed the claim of depreciation to the tune of Rs. 42,24,297/-in respect of such items the value of which was 93, 87, 327/-. 22. While inviting our attention to page No. 71 of the paperbook, it is submitted by the Ld. AR that the assessee originally claimed the depreciation in respect of UPS, printer, project, Cabinet and air conditioner to the tune of Rs. 48,71,847/-but the Assessing Officer considered the UPS, printer, projector and the Cabinet worth Rs. 35,61,885/- as office equipment whereas the assessee sue moto admitted Cabinet and air conditioner to be the part of office equipment and its value is Rs. 1,05,870/-in respect of which a disallowance of Rs. 47,642/-alone could be made. 23. On a perusal of the details furnished as to the additions made in the block of computers and computer peripherals, we find that such addition was in respect of UPS, printer, projector, Cabinet and air conditioner, out of which the assessee sue moto admits that Cabinet and air conditioner do not form part of the computer peripherals whereas other item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken for the earlier years under identical circumstances. Ground No. 6 is accordingly devoid of merits and is dismissed. 27. Ground No. 7 relates to the disallowance of depreciation on account of merger with the Tropicana Beverages Company under normal computation. On this aspect, Ld. AR submitted before the Ld. CIT(A) that this is an inadvertent mistake crept into record because instead of considering the amount of depreciation appearing in the revised tax audit report learned Assessing Officer relied on the original tax audit report for computing the depreciation amount under the provisions of the Act. Ld. CIT(A) considering the revised tax audit report, directed the Assessing Officer to verify the record and allow depreciation as per the tax audit report filed pursuant to merger of Tropicana Beverages Company with the assessee. 28. From the impugned assessment order, we find that on noticing the chart of depreciation as per income Tax Act, 1961 duly certified by the auditor which shows the amount of depreciation at Rs. 1 22, 63, 09, 689/- as against the amount of depreciation of Rs. 1 22, 82, 86, 789/-directed in the revised computation of income, learned Assessing Officer brou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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